WTI Falls! Russia in Economic Panic Fundraiser - Econ Lessons

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Hey folks, my name is Mark Biernat. In this video, I want to take you through something that’s happening quietly but has massive implications — the collapse of Russia’s oil-based economy as global prices, especially WTI, continue to fall. When you look past the daily headlines, what’s really unfolding is a slow structural unraveling of a system that has depended for decades on oil revenue to keep the state running. P.S., I am on my new Camera. It is a conscious ethical choice.

For most of modern Russia’s history, oil has not just been a commodity; it’s been the lifeblood of the entire political and fiscal system. The Russian budget depends on oil and gas for roughly forty percent of its total revenue. When prices stay high, the money flows easily — pensions get paid, the ruble holds steady, and the government can finance both domestic programs and its foreign ambitions. But when the price of oil falls below the country’s fiscal breakeven, which is around seventy-five to eighty-five dollars a barrel, everything begins to tighten. That’s where we are right now.

WTI has dropped into the low sixties, and because Russian Urals crude sells at a discount, Moscow is effectively earning under sixty dollars per barrel. That’s a problem that no amount of state propaganda can spin away. Every ten-dollar drop in oil prices costs the Kremlin roughly half a percent of GDP in lost revenue. The National Welfare Fund, once a source of national pride, is being drained month by month to cover routine expenses. If this trend continues, those reserves could run dangerously low within a year.

When oil revenue falls, the ruble follows. A weaker ruble means more expensive imports and rising inflation. The central bank is forced to raise interest rates to prevent total currency collapse, but higher rates choke off credit and small business growth. The result is a feedback loop — a kind of economic suffocation that hits ordinary people long before it shows up in official statistics. You can already see it in delayed wages, shrinking purchasing power, and regional governments struggling to meet payroll.

Now, some analysts describe this as a textbook case of the “resource curse.” When an economy depends too heavily on exporting one commodity, it becomes trapped by its own success. Instead of diversifying, the government builds a fiscal system around the expectation that oil prices will stay high forever. When they don’t, the state finds itself with commitments it can’t sustain. That’s what we’re witnessing now — not a sudden crash, but a long unwinding of a rentier model that can no longer fund itself.

You might ask, can Russia adapt? It’s possible, but diversification takes time, investment, and trust — three things in short supply right now. The war effort is consuming billions every month, scaring away what little foreign capital remains. Domestically, industrial capacity is aging, and many of the technologies needed to modernize production are under sanctions. Even if Russia could switch to non-oil exports, global competition in metals and agriculture is fierce, and profit margins are thin.

So what happens when the world no longer needs Russian oil the way it used to? We’re already seeing it. As renewables expand and electric vehicles become mainstream, the demand for crude isn’t growing the way it once did. The shift is gradual, but for an economy tied to a single resource, even a gradual decline feels like a collapse. The rest of the world is moving toward energy efficiency, innovation, and decentralization. Russia is still betting everything on a resource that’s losing its strategic value.

When you add it all up — shrinking revenues, a falling ruble, rising inflation, and mounting fiscal pressure — the outcome looks inevitable. The economic foundation that once financed Russia’s global ambitions is eroding from underneath. And as history shows, when the money runs out, political stability is the next to go.

Thanks for watching, and if you’re interested in deeper economic analysis like this, stay tuned. My name is Mark Biernat, and I’ll see you in the next one.